strategic orientation and external environment on ...mer.ase.ro/files/2018_1/3-4.pdf · create...

39

Strategic Orientation and External Environment

on Organizational Commitment

Basim Abbas Kraidy JASSMY1 Cristian-Silviu BANACU2

Zaki Muhammad Abbas BHAYA3

ABSTRACT

Aims of this study is to investigate the impact of the dimensions of strategic orientation (i.e.

customer orientation, competitor orientation and interfunctional coordination) and the

aspects of external environment (i.e., market turbulence and competitive intensity) on

organizational commitment in the agricultural bank in AL-Qadissya governorate in Iraq.

Materials and methods -To achieve the aim the data collected through questionnaire survey

applied to 54 employees in various departments of the bank. The data analysis performed by

using SPSS (version 20) and R program. Results -Statistical findings revealed there is a

significant relationship between competitor orientation, interfunctional coordination,

competitive intensity and organizational commitment. There is no significant relationship

between market turbulence, customer orientation and organizational commitment. Conclusion

- These findings introduce useful views and conclusion for the management to take into

account for developing organizational commitment among their employees. According to the

study, all the dimensions of strategic orientation and influences of external environment to

increase organizational commitment could enhance findings. Besides, findings have

significant implications for a bank’s strategies to develop organizational commitment and to

uncover the influences of market turbulence and competitive intensity. Managers should take

interest in the role of strategic orientation besides external environment to improve

organizational commitment. Managers should also develop a robust culture which reflects

organizational commitment in order to ensure the survival of the bank and its growth when

facing competitors and overcoming any challenges.

KEYWORDS: competitive intensity, strategic orientation, market turbulence, organizational

commitment, strategic orientation

JEL CLASSIFICATION: G32, C15, M15, IT

1. INTRODUCTION

Previous strategic orientation literature has asserted the importance of strategic orientation for

organizational performance (Kohli & Jaworski, 1990; Narver & Slater 1990). It has been

confirm that a long-term sustainability of the organization's advantage can be achieve and

maintained by responding to customer needs and wants (Lai et al., 2009). Furthermore, some

scholars like Ozsahin et al. (2013) demonstrated that strategic orientation represents a source

of competitive advantage and that it brings success to the organization. Idar et al. (2012)

refers to strategic orientation as the organization's culture that most effectively and efficiently

1 The Bucharest University of Economic Studies, Romania, [email protected], corresponding author 2 The Bucharest University of Economic Studies, [email protected] 3 The Bucharest University of Economic, Romania, [email protected]

mailto:[email protected]:[email protected]:[email protected]

Basim Abbas Kraidy JASSMY, Cristian-Silviu BANACU, Zaki Muhammad Abbas BHAYA

40

employs the suitable behaviours for producing superior value for the customer, bringing

performance to the organization and proving there is a significant relationship between

strategic orientation and performance (Naidoo, 2010). Strategy is the first step taken by an

organization as reaction to the business environment conditions (Slater & Narver, 1994).

Strategic orientation cannot influence directly on financial performance by ignoring

information. Salyova et al. (2015) clarify the importance of strategic orientation and its effect

on profitability by being better than the competitors, resulting from implementing strategic

orientation in the market. The results demonstrate that strategic orientation is significant to

organizational performance. Some scholars conclude that strategic orientation can influence

directly or indirectly the organization performance (Suliyanto & Rahab, 2012).

Felgueira and Rodrigues (2015) reported that higher degree of strategic orientation is

improving the organizational performance. Wei et al. (2014) proved that besides the direct

relationship between strategic orientation and performance, proactive and responsive strategic

orientation is essential for organizational norms and beliefs, which effect the organizational

performance.

Organizations should generate and disseminate market intelligence on facing customer needs

and wants to improve their success compared with competitors (Kirca, 2011). Strategic

orientation concepts are common behaviours in the organizations or some procedures that

create superior customer value (Suliyanto & Rahab, 2012). Market conditions are faced by

any organization and to respond to these conditions, an organization must develop something

new or different from its competitors (Jaworski & Kohli, 1993).

Although strategic orientations in organizations are identified in different ways, including the

use of multiple terms commensurate with the direction, direction and desires of the

department, it represents a formula of strategy in improving the organization's performance

Mariadoss et al. (2016).

The strategic orientation is direct to processes that represent decision-making in the process of

activities and innovation of the working organization Zhang et al. (2016). Likewise Newman

et al. (2016). The main objective of the organization's approach to the market is mainly to

provide high value to customers through the ideas gained by the organization by analyzing

competitors and customers and balancing them.

Some scholars differentiate between strategic orientation and marketing orientation, while

others consider them the same. The authors prefer using strategic orientation because it has

been widely used in scientific research (Salyova et al., 2015). For organizations, the

environment has become more sophisticated than ever before. In this environment,

organizations should follow the rapid changes in the needs, wants of the customer, and should

be closer to the customer and market to overcome competitors and to gain competitive

advantage (Chang, 2014).

Our research attempts to contribute to the external environment and strategic orientation, as

well as to the role of strategic orientation in improving organizational commitment in an

effort to fill in an important gap in previous research that details the effects of strategic

orientation on organizational commitment.

The majority of the literature was publish in developed countries and only partly, the results

of those studies can be apply to the Middle East region due to differences in strategic

Management and Economics Review Volume 3, Issue 1, 2018

41

orientation. In advanced countries, the attitude towards strategic orientation is more positive

than in emerging countries. However, literature provides some evidence on the effect of

strategic orientation on organizational commitment in the Middle East region. The literature

review indicates some studies in different countries, while there is no previous study on Iraqi

banks. To fill this gap, we investigated the effect of strategic orientation on organizational

commitment in the agricultural bank located in Al-Qadissya governorate in Iraq. The

mechanism through which strategic orientation affects the organizational commitment has not

received adequate attention. Moreover, this study also emphasises the importance of strategic

orientation in the organizational commitment with external environment (market turbulence

and competitive intensity), addressing this gap as well.

2. REVIEW OF THE SCIENTIFIC LITERATURE

2.1. Behavioural perspective versus cultural perspective for strategic orientation Kohli and Jaworski (1990) and Narver and Slater (1990) developed two major perspectives -

the one first is called behavioural perspective and the second one is called cultural

perspective.

2.1.1. Behavioural perspective Kohli and Jaworski (1990) introduced a form for strategic orientation definition called

behavioural perspective that concerns intelligence related with current and latent needs of

customer; it includes three types of activities:

a) Organization-wide generation of strategic orientation concerning current and latent needs of customer.

b) Dissemination of the information between the departments in the entire organization . c) Responsiveness of the whole organization to various information brought from

intelligence. Moreover, the study describes how strategic orientation is relate to

generation of information, dissemination and responsiveness to market intelligence and

emphasis of market information (Kirca, 2011; Kohli & Jaworski, 1990; Lai et al., 2009).

Ozsahin et al. (2013) have the same approach but added the focus on current as well as

future needs of the customer, which defines the strategic orientation as obtaining

information whether the needs are current or latent needs (Chad, 2013).

Many scholars have used this perspective and tried to measure strategic orientation

behaviours in their studies (Zhang, 2008). Therefore, the behavioural perspective is define as

a response to competitive operational dynamics that surround the organization (Naidoo,

2010).

2.1.2. Cultural perspective

Narver and Slater (1990) discussed that organizational culture has three components:

customer orientation, competitor orientation and interfunctional coordination. These

components implemented by the decision criteria have a long-term perspective and aim to

have a positive impact on profitability. Therefore, the cultural perspective concentrates on

organizational norms and values that will create best behaviours depending on the capacity to

react of the targeted market according to the company’s knowledge of customers and

competitors.

Kirca (2011) and Idar et al. (2012) relate to the perspective that the primary culture of the

organization is to create essential value for customers, to enforce the customer position as the

highest priority for its work. Therefore, part of the organizational culture is to create a group


42

of behaviours or activities called 'strategic orientation' (Hurley and Hult 1998), considering

the strategic orientation as the component of cultural organization that generates superior

value for customer by building effective and efficient behaviours. This may generate optimal

performance for the organization (Lai et al. 2009).

The study of Ozsahin et al. (2013) describes strategic orientation as culture that represents

excellent performance by its organizational commitment in order to bring superior value for

present and future customers. The three components include customer orientation, competitor

orientation and interfunctional coordination. The organizations focus on two decisions

standards: long–range focus and profitability results (Chad 2013, Felgueira and Rodrigues

2015). Therefore, some scholars attempted to assess which perspectives are useful for

building the company. According to Narver and Slater (1990), the most important is

forecasting the power for the work (Zhang 2008). The authors also recommend strategic

orientation (Narver and Slater 1990) because it focuses on organizational culture, which

builds the organizational commitment as a view of organizational capability (Ozsahin et al.

2013).

Customer orientation

Auh and Menguc (2007) discussed the customer orientation as enforcement of the ability to

enhance performance, which appears more as control among organizations. This orientation

has been accepted as customer orientation and through the definition in which the

organization strives to understand the customer needs and wants (Dev et al., 2009); customer

orientation has significant influence on organizational performance.

Brockman et al. (2012) debated that customer orientation boosts the performance and has

impact in risk taking through innovation and creating opportunity. Customer orientation refers

to focusing on the needs of the target market, which creates excellent customer value with

strong customer orientation. Moreover, Theoharakis and Hooley (2008) refer to the

combination between customer orientation and organizational innovation, which in their

opinion is very difficult to obtain, or it takes more time to achieve. From the competitors,

organizations are facing limits related to imitation, which may isolate the organization.

Thakor and Joshi (2005) found that customer orientation has a positive impact on the

organization and it can enhanced by identifying and producing goods and services to match

customer requirements and thus increasing customer satisfaction. Ndubisi (2011) indicates

that customer orientation is positively significant for customer satisfaction. Some scholars

discussed the customer-oriented approach for qualifying, determination and quantifying the

needs and wants of the customer as part of product or service development procedures

(Naidoo, 2010).

Despite the fact that customer orientation is use as equivalent term for strategic orientation or

as a basic part of wide definitions of strategic orientation, it is describe as the relationship

between the customer and the organization. Strategic orientation concerns the organization’s

activities (Rapp et al., 2012). Customer orientation is consider as the ability of salespeople to

introduce assistance of their customers in the form of quality of the relationship between the

customer and the salesperson. However, Herhausen (2011) mentions that organizations must

endeavour to recognize and incorporate the most important drivers to maximize their capacity

to investigate latent and uncovered customer requirements. The organization should identify

the best positions and follow detailed recommendations for technological driven innovators

and constraints facing these resources. Bhattacharyya and Jha (2014) focused on


43

organizations that are close to their markets. Such organizations that respond to the needs and

preferences of their customers would demonstrate customer orientation and would be in a

better position to recognize their customer according to their knowledge of the shifting

customer requirements.

Suliyanto and Rahab (2012) mention that organizations should continuously boost strategic

orientation by collecting customer information. Moreover, Kirca (2011) concluded that

connecting the customer to a mechanism (i.e., customer satisfaction and retention) could

facilitate the transfer from strategic orientation into improved organizational performance.

Ozsahin et al. (2013) demonstrates that the customer should have high priority but without

excluding the other stakeholders in order to achieve high profit. This done by following the

needs and wants of customer in the present time and the future because the customer

represents the heart of organization. Altinay (2010) advocates for a continuous proactive

disposition to meet customer requirements. Furthermore, Singh and Koshy (2011) suggested

creating value for customer by enforcing the customer relationship and that is achieve by sales

oriented people and focusing on short term goals. Zhou and Li (2007) define the customer

orientation as adequate understanding of the targeted customer.

Pousa and Mathieu (2014) found that to achieve performance, organizations need to train their

employees to develop their customer-orientated attitudes and reduce profit-oriented

behaviour. The authors discussed the differences between customer orientation and sales

orientation by clarifying these items. Customer orientation refers to behaviours of individuals

oriented to make better customer decisions that will enhance their satisfaction and thus

creating customer trust which leads to customer retention and finally to achieving

performance. Sales orientation indicates the capacity of a salesperson to utilize selling

techniques and tactics to persuade the customer to buy the product or service. Rapp et al.

(2010) found that customer orientation is in a positive relationship with sales capability and

this research brought significant changes in the external environment, considered as a

moderate variable in this relation.

Jones et al. (2003) concluded that strategic orientation is positively influence by customer

orientation through organizational commitment. Thurau (2004) reported that the key driver

for customer satisfaction begins with individual level of customer orientation, and that is

clearly stronger than organizational commitment or retention. In order to maintain this

relationship with their customers, organizations should follow their customer commitment by

customer satisfaction and retention (Ozsahin et al., 2013)

Competitor orientation

Zhou and Li (2007) define competitor orientation as focusing on identifying rivals’ strengths

and weaknesses and following their actions. Competitor orientation for organizations is their

focus on monitoring the actions of their competitors. Dev et al. (2009) revealed that there was

no significant relationship between competitor orientation and organizational performance.

The study of Suliyanto and Rahab (2012) concluded that organizations should increase

strategic orientation by gathering information about competitors whether recent or latent.

Ozsahin et al. (2013) discussed that competitor orientation enables organizations to develop a

wider vision of strategies for gaining competitive advantage. Moreover, observing all

competitors whether current or potential enables companies to understand their strengths and

weaknesses. Naidoo (2010) discussed the relationship between competitor orientation and the

organization’s ability to determine, sustain and increase its strengths and to reduce the


44

weaknesses compared with competitors. In the work of Altinay (2010) is recommend for

organizations to understand current and potential competitors and to collect more information

about strengths and weakness, both on short terms as well as on long term.

Debruyne et al. (2010) when analysing competitor orientation asserted that it is connect to all

functions. The approach of managers is to overcome their competitors by any means, which

may lead to increased revenue, but on the long run, this approach may become incompatible

with other aspects. Bendle and Vandenbosch (2014) observed that managers were

encouraged, revenue increased but also initiative can suffer. Zhou and Li (2007) indicated that

customer and competitor orientation function differently and their significance for the

performance of companies differs across various market situations. Jiang and Kortmann

(2014) analyse the ability of organizations to collect information and knowledge faster than

rivals do. This ability develops the knowledge resources that are difficult to imitate by

competitors to bring valuable asset in mobile markets where imitation is widely employed.

Moreover, Powpaka (2006) discussed that the two orientations (customer and competitor) are

design to include all activities that are perform in order to gather information about customers

and competitors in the market and to spread this information through various management

functions.

Foreman et al. (2014) investigated how to measure strategic orientation on customer and

competitor orientation with removing interfunctional coordination, because this construct

reflects coordination between all the levels of an organization. On the other hand, it is difficult

to measure this construct by using objective standards. The authors support this viewpoint

because it is very important to acknowledge the role of this construct among departments.

This approach is rare, and we can exclude any bias by using statically scientific methods. In

addition, the authors used the same dimensions as Narver and Slater (1990).

Interfunctional coordination

Although Rapp, et al. (2012) refer of the interfunctional dimension which consists of

coordinating all the resources across functions to improve customer value and achieve

superior levels, the organization must put the suitable technological infrastructure in place for

the external sales force. Suliyanto and Rahab (2012) consider that in order to improve

strategic orientation, an organization should strive to continuously coordinate all functions.

Ozsahin et al. (2013) refer to this component as a competitive advantage and it can be

incorporate in any department of an organization by understanding the role of every

employee. Zhou and Li (2007) consider that the use of all resources and customer–related

functions should be coordinated through the entire organization. Dev et al. (2009) defined

organizational culture as the concept that directs all employees in all departments of the

business towards understanding the firm’s market; the authors found that there is no

significant relationship between interfunctional coordination and organizational performance.

Furthermore, Salyova et al. (2015) defined interfunctional coordination as management and

utilization of resources for creating best value for customer.

Naidoo (2010) discussed that interfunctional coordination was relate with the organization’s

capacity to unify all efforts within the organization to implementation and coordinate among

different functions. Moreover, Altinay (2010) refers to sharing information among

departments in the organization and implementing new strategies to develop the activity and

put new plans into action to overcome competitors.


45

Powpaka (2006) reported the interfunctional coordination depends on customer and

competitor orientation information and it involves the entire organization to coordinate the

efforts for creating best value for customer. According to the authors, the there is no relation

between competitor orientation and organizational commitment.

2.2. Market turbulence Rapp et al. (2010) found that the external environment of the organization, which is measure

by the dynamism of the environmental structure, has significant impact on the performance,

which is important to take into consideration. Efforts have been dedicate to investigate the

impact of environment conditions on strategic orientation (Kirca, 2011).

Many scholars examined the relationship between strategic orientation and organizational

performance, which is different according to the industry characteristics and type (Kirca,

2011). Lai et al. (2009) argued that the environmental variables could not disturb the

processes, but could bring opportunities to the organization.

Appiah-Adu and Singh (1998) as well as Jaworski and Kohli (1993) debated that the levels of

environmental turbulence is essential for dealing with customers. In the case of a high market

turbulence, a positive approach is to adapt according to the organization’s readiness to reduce

uncertainty. On the other hand, if the organization is facing a stable market turbulence when

the customer requirements are not rapidly changing during short periods, the organization has

to make little adaptations and instead needs to focus on customer orientation.

Competitive intensity

Saboo and Grewal (2013) indicated that competitive intensity is define as the mixture of

behaviours, resources and capacities of competitors. The competitive intensity increases due

to competitive dynamism, so the value of competitor orientation is very important in

monitoring their activities; thus, competitor orientation will grow with higher competitive

intensity. Foreman et al. (2014) stated that the role of competitive intensity is a moderate

variable between strategic orientation and performance. In highly competitive environment,

the organization is required to concentrate more effort in the identification of competitors;

therefore, organizations focus on their competitors in order to avoid customer loss. This

approach is different from the approach used in stable environmental conditions.

Appiah-Adu and Singh (1998) indicated that for organizations facing a highly competitive

environment, customers have many alternatives to satisfy their preferences and needs. In this

case, the organization needs to be more sensitive and offer a more adequate response to

customer needs in rapidly changing environment. Therefore, if an organization is not

customer orientated, it may be facing the risk of customer loss due to high competition.

The results from previous studies concerning the environmental factors were inconclusive

(Kirca 2011). A review of previous studies that investigated the relationship between strategic

orientation and environmental factors (i.e. market turbulence, competitive intensity) was

developed and investigated in various studies such as the study Jaworski and Kohli (1993).

2.3. Organizational commitment Atak and Erturgut (2010) describe the organizational commitment as a function that aims to

reduce the absenteeism and turnover while avoiding any disruption in the activity. Therefore,

it is important to boost the quality and quantity of the actions and decisions that reduce

absenteeism and turnover and that increase behaviours essential for the success of the

organization’s processes. Ozsahin et al. (2013) defined organizational commitment as the

behavioural vision or perspective identified as participation, which is describe as the desire to


46

remain in the organization while the organizations employ important efforts in creating a

positive environment for their employees. Organizational commitment has been the theme of

many theoretical and experiential studies in the field of organizational behaviour (Dhurup et

al., 2016). Lai et al. (2009) indicated that strategic orientation is focus on customer

satisfaction and organizational commitment. Some researchers like Ozsahin et al. (2013)

discussed that the strong desire to stay with the company is specific for organizations that are

ready to allocate important efforts for employees’ satisfaction; it also appears if the values and

beliefs of the company are the same as those of the employee. Hanaysha (2016a) indicated

that the connection between individuals has a significant positive impact on organizational

commitment and reported that organizational learning culture can be consider as one of the

main variables for commitment.

Lai et al. (2009) stated that there is a positive relationship between high commitment,

strategic orientation and performance. Ozsahin et al. (2013) discussed that increasing

organizational commitment is at the top of actions taken for reaching performance in an

organization. Organizational commitment occurs when organizations focus on recruiting

employees and retaining valuable employees. Hanaysha (2016b) indicated that individuals’

attitude has positive effect on organizational commitment; organizational commitment is the

level of enthusiasm of the individuals on continuing working for the organization. Powpaka

(2006) discussed that the strategic orientation minimizes the employees’ stress like confusion

and conflicting by maximizing job satisfaction and organizational commitment. Felgueira and

Rodrigues (2015) demonstrated that if individuals feel that they bring positive contribution to

the company, their attitude is transfer to commitment to the organization and brings

satisfaction, in the end enabling the organization to respond to customer requirements. Amdan

et al. (2016) conclude that organizational commitment is essential to maintain individuals’

productivity and efficiency at high levels. Turnover can be a cause for understaffing which

can lead to lower profitability, in case the organization is not focus on organizational

commitment. Salahudin et al. (2016) show that organizations with high organizational

commitment have a solid human capital and a competitive advantage compared with other

companies active in the same field. Individuals are ready to work to enhance their

organization’s success, which indicates a match between values and motivation. Creating

loyalty as indicator of high organizational commitment represents one of the main objectives

of organizations.

Atak and Erturgut (2010) indicated that the dimensions of organizational commitment are

influenced by various conditions. Some researchers have challenged the role of organizational

commitment in the organizational goals. Allen and Meyer (1990) presented three components

of organizational commitment to discuss this concept: affective commitment, normative

commitment and continuance commitment.

Affective commitment results from emotions of the individuals coming from positive

experiences. A strong affective commitment motivates employees to remain in the

organization because their expectations are met. Salahudin et al. (2016) include three aspects:

the emotional response to the organization, identification of the role of these emotions and

identification of the organizational mechanisms (Dhurup et al. 2016). Adman et al. (2016)

refers to the emotional connection to the organization such as the feeling of belonging.

Normative commitment occurs when the employees stay with a company because of social

and organizational cultures (Dhurup et al. 2016, Salahudin et al. 2016). Adman et al. (2016)

refer to these feelings as feelings of ethical obligation.


47

Continuance commitment represents the concerns with leaving an organization (Dhurup et al.

2016). It is connect to turnover and depends on financial changes between the individuals and

organization (Salahudin et al., 2016). Adman et al. (2016) distinguished a more reasonable

analysis of the assets against costs of leaving the organization. Dhurup et al. (2016) described

it as a combination of positive and negative aspects of working in an organization.

In this study, the authors examine the strategic orientation as part of the organizational culture

and organizational commitment. Organizations should prevent dissatisfied employees, which

create conflict. Workplace conflict can prevent the organization to reach its goals, which are

represent by customer satisfaction.

3. RESEARCH METHODOLOGY

The purpose of this study is to investigate the relationship between strategic orientation and

organizational commitment. Besides the relationship between external environment and

organizational commitment based on previous studies hypotheses, the following basic

hypothesis is proposed:

H: Strategic orientation (customer orientation, competitor orientation and interfunctional

coordination) and external environment (market turbulence and competitive intensity) have

influence on organizational commitment.

3.1. The scale For measuring the strategic orientation according to Narver and Slater (1990), the Likert scale

use to capture the behaviour of respondents in various functions of the organization (Salyova et

al., 2015). The population for this study was the agricultural bank in Al–Qadissya governorate

in Iraq. A questionnaire survey was distribute to the managers of the agricultural bank. 75

questionnaire forms were distributed and 60 returned, out of which 54 were valid and useable.

These questionnaire forms were suitable to apply SPSS V 20.0 and R program. The research

model developed within the context of this study is present in figure no. 1.

Figure 1. Conceptual framework

Source:prepared by atuhors


48

Figure 1 presents the hypothesis measurement model used in this study. The data were obtain

from developing a questionnaire with the dimensions of the external environment (market

turbulence and competitive intensity) from the studies of Auh and Menguc (2007) and Kirca

(2011); strategic orientation from the work of Naidoo (2010); organizational commitment from

Ozsahin et al. (2013). A five-point liker scale was used ranging from 1 (strongly disagree) to 5

(strongly agree). The gathered data from questionnaires were analysed through SPSS 20.0 and

R -program. The items of the questionnaire were divide into 3 items for market turbulence, 5

items for competitive intensity, 5 items for customer orientation, 4 items for competitor

orientation, 3 items for interfunctional coordination and 7 items for organizational commitment.

Table 1 shows all the items from each of the dimensions and Cronbach's Alpha for each one of

them.

Table 1. Results of reliability for Cronbach's Alpha

Construct No. of items Cronbach's alpha

Market turbulence (mark) 3 .720

Competitive intensity (compin) 5 .742

Customer orientation (cus) 5 .744

Competitor orientation (com) 4 .776

Interfunctional coordination (inter) 3 .731

Organizational commitment (org) 7 .755

Source: prepared by authors

This paper developing based on previous studies, while some of the questions modified in order

to be more relevant to the purpose of the study. For the reliability test was conducted an analysis

to determine the internal consistency of the scale used in this study which is higher according to

Hair et al. (2006). The Cronbach's Alpha values indicated for all factors are above 0.70 showing

the reliability of the scale used in this survey. The reliability coefficient is acceptable in order to

eliminate the factors with low reliability.

3.2. Analysis

Table 2. Correlation matrix between the variables

Variable

Variable

Y: X1: X2: X3: X4: X5:

Org

an

iza

tio

na

l

com

mit

men

t

Ma

rket

turb

ule

nce

Cu

sto

mer

ori

enta

tio

n

Co

mp

etit

ive

inte

nsi

ty

Co

mp

etit

or

ori

enta

tio

n

Inte

rfu

nct

ion

al

coo

rdin

ati

on

Y: Organizational commitment 1 0.7622a 0.7939a 0.8300a 0.6487a 0.6952a

X1: Market turbulence 0.7622a 1 0.7814a 0.5604a 0.6466a 0.7456a

X2: Customer orientation 0.7939a 0.7814a 1 0.7213a 0.5604a 0.7746a

X3: Competitive intensity 0.8300a 0.5604a 0.7213a 1 0.5048a 0.5917a

X4: Competitor orientation 0.6487a 0.6466a 0.5604a 0.5048a 1 0.7416a

X5: Interfunctional coordination 0.6952a 0.7456a 0.7746a 0.5917a 0.7416a 1 acorrelation is significant at the 0.01 level.

Source: prepared by authors.

From Table 2, the variable (organizational commitment) has significant and positive correlation

relationship with the variables market turbulence and customer orientation. Competitive

intensity, competitor orientation and interfunctional coordination have values of r = 0.762,

0.793, 0.830, 0.648, 0.695, respectively. All these correlations are significant at 0.01 level.


49

Furthermore, market turbulence has significant and positive correlation with the variables

customer orientation, competitive intensity, competitor orientation and interfunctional

coordination, with values of r = 0.781, 0.560, 0.646, 0.745, respectively. All these correlations

are significant at 0.01 level. The same table shows that the variable (customer orientation) has

significant and positive correlation relationship with the variables competitive intensity,

competitor orientation and interfunctional coordination, with the values of r = 0.721, 0.560,

0.774, respectively. All these correlations are significant at 0.01 level. Moreover, in the same

table the variable competitive intensity has significant positive correlation with the variables

competitor orientation and interfunctional coordination, with (r) values as follows: r = 0.504,

0.591. All these correlations are significant at 0.01 level. Finally, in the same table, the variable

competitor orientation has significant positive correlation with interfunctional coordination (r=

0.741). The summary of these relationships is show in Figure 2.

Figure 2. The spread of relationship between the variables


Figure 2 presents the spread of the values of variables shows that there are positive and

significant relationships between variables. From the spread of the values of variables, there are

positive and significant relationships between these variables. The amount of these relationships

between the variables is show in Figure 3.


50

Figure 3. The amount of correlation relationships between the variables


Figure no. 3 presents the amount of correlations between the variables. In this paper, quantile

regression is use in order to provide the complete relationship between the dependent variable

and independent variable, through building one more quantile regression line under different

quantile levels. The quantile regression model is more robust compared with the classical

regression model. In this paper, four quantile levels (0.20, 0.40, 0.60, and 0.80) are use (based

on the authors’ opinion).

Table 3. Coefficient estimation for quantile regression models via four quantile levels

Coefficients quantile level

0.20 0.40 0.60 0.80

Intercept 1.6207a 2.7881 3.30892 3.4922

X1: Market turbulence 1.3950 0.3826 -0.13093 -0.0188

X2: Competitive intensity -0.0897b -0.1526b 0.04684 -0.0747

X3: Customer orientation 0.0820 0.1066 0.24595 0.2480

X4: Competitor orientation 0.2403a 0.2762b* 0.13704b 0.1116

X5: Inter functional coordination 0.0815a 0.1031b -0.00269 0.0124

The pseudo-R squared 0.7224185 0.5675732 0.334364 0.056272 a is significant at 0.01 level.

b is significant at 0.05.

Source: prepared by authors.

From table no. 3, the optimal quantile regression model in representation of the data under study

is at quantile level (0.2), as a result from the pseudo-R squared. The quantile regression model

at quantile level (0.4) also has strength in explanation of the data under study. The quantile

regression models under two quantile levels (0.60, 0.80) have weakness in representation of the

data under study.


51

In this paper, the quantile regression models are focused at two quantile levels (0.20, 0.40),

because the independent variables (market turbulence, competitive intensity, customer

orientation, competitor orientation and interfunctional coordination) of these quantile regression

models can explain 72.24% and 56.75% respectively from the variation in the dependent

variable (organizational commitment).

Quantile regression model at quantile level 0.20

(a) Market turbulence variable

The estimated coefficient of market turbulence variable is 1.3950. This indicates that ceteris

paribus, an increase in the market turbulence variable by one unit leads to an increase in the

dependent variable (organizational commitment) by 1.3950 units, due to this variable being in a

positive relationship with the dependent variable. It has insignificant effect on the organizational

commitment variable.

(b) Competitive intensity variable

The estimated coefficient of the competitive intensity variable is -0.0897. This indicates that

ceteris paribus, an increase in the competitive intensity variable by one unit leads to a decrease

in the dependent variable (organizational commitment) by 0.0897 units, due to this variable

being in an inverse relationship with the dependent variable. It has significant effect on the

organizational commitment variable.

(c) Customer orientation variable

The estimated coefficient of the customer orientation variable is 0.0820. This indicates that

ceteris paribus, an increase in the Customer orientation variable by one unit leads to an increase


being in a positive relationship with the dependent variable. It has insignificant effect on the


(d) Competitor orientation variable

The estimated coefficient of the competitor orientation variable is 0.2403. This indicates that

ceteris paribus, an increase in the competitor orientation variable by one unit leads to an

increase in the dependent variable (organizational commitment) by 0.2403 units, due to this

variable being in a positive relationship with the dependent variable. It has significant effect on

the organizational commitment variable.

(e) Interfunctional coordination variable

The estimated coefficient of the interfunctional coordination variable is 0.0815. This indicates

that ceteris paribus, an increase in the interfunctional coordination variable by one unit leads to

an increase in the dependent variable (organizational commitment) by 0.0815 units, due to this


organizational commitment.

Quantile regression model at quantile level 0.40

(a) Market turbulence variable

The estimated coefficient of market turbulence variable is 0.3826. This indicates that ceteris

paribus, an increase in the market turbulence variable by one unit leads to an increase in the

dependent variable (organizational commitment) by 0.3826 units, due to this variable being in a

positive relationship with the dependent variable. It has insignificant effect on the organizational

commitment variable.


52

(b) Competitive intensity variable

The estimated coefficient of the competitive intensity variable is -0.1526. This indicates that

ceteris paribus, an increase in the competitive intensity variable by one unit leads to a decrease


being in an inverse relationship with the dependent variable. It has significant effect on the


(c) Customer orientation variable

The estimated coefficient of the customer orientation variable is 0.1066. This indicates that

ceteris paribus, an increase in the Customer orientation variable by one unit leads to an increase


being in a positive relationship with the dependent variable. It has insignificant effect on the


(d) Competitor orientation variable

The estimated coefficient of the competitor orientation variable is 0.2762. This indicates that

ceteris paribus, an increase in the competitor orientation variable by one unit leads to an

increase in the dependent variable (organizational commitment) by 0.2762 units, due to this


the organizational commitment variable.

(e) Interfunctional coordination variable

The estimated coefficient of the interfunctional coordination variable is 0.1031. This indicates

that ceteris paribus, an increase in the interfunctional coordination variable by one unit leads to

an increase in the dependent variable (organizational commitment) by 0.1031 units, due to this


organizational commitment.

The interpretation of quantile regression models at two quantile levels (0.60, 0.80) is not

included due to the fact that these quantile regression models are not important in the

interpretation of the data under study. This clear from the pseudo-R squared.

4. RESULTS AND DISCUSSION

This study provides an understanding on how strategic orientation and external environment can

used to increase organizational commitment. Therefore, the statistical findings show that

competitor orientation has a significant positive effect on organizational commitment and it is

consistent with previous studies (Kirca, 2011; Rapp et al., 2010) and inconsistent with the study

of Powpaka (2006). This study also confirmed that competitive intensity is one of the main

factors that lead to organizational commitment and it is consistent with previous studies

(Ozsahin et al., 2013; Hanaysha, 2016a; Hanaysha, 2016b).

The above statistical findings prove that there are significant strong relationships between

competitive intensity, competitor orientation and interfunctional coordination on organizational

commitment and this is consistent with previous studies (Powpaka, 2006; Rapp et al., 2010;

Ndubisi, 2011; Dev et al., 2009).


53

5. CONCLUSION

To achieve the objectives of this study the conceptual model was design on the constructs of

strategic orientation, external environment and organizational commitment. Therefore, when

employees are treat well, they handle their activities effectively in order to achieve the

organizational goals and their level of commitment will increase as a result.

One of the debates in recent studies in strategic management is that strategic orientation

improves organizational commitment. Therefore, some studies revealed that organizations can

boost organizational commitment and that organizations that adapted strategic orientation to the

external environment are more likely to improve organizational commitment than organizations

that adopted strategic orientation without external environment. The effect of strategic

orientation and external environment on organizational commitment is not clear. This study

focuses on the importance of strategic orientation and organizational commitment and identifies

the effects of external environment on organizational commitment. Findings revealed that

strategic orientation and external environment are strongly correlated with organizational

commitment.

These findings are expect to provide management and participants in the strategic management

with useful feasible insights into the relationship between the model of strategic orientation and

organizational commitment. Managers should take interest in the role of strategic orientation

besides external environment to improve organizational commitment. Managers should also

develop a robust culture which reflects organizational commitment in order to ensure the

survival of the company and its growth when facing competitors and overcoming any

challenges. Companies offering services may need to focus more on adaptation than those with

core business on production, because the interaction with customer in service offering business

is crucial. Additionally, a comfortable working environment is important to enable employees

to focus on their working and to improve their activities, resulting in commitment for the

organization. Employees feel motivated which leads to higher individual performance and thus,

overall better performance of the company (in this case, of the bank).

Finally, only five variables were consider to investigate the effects on organizational

commitment. Hence, future studies are suggest to test other variables, such as internal variables

that include leadership charisma and organizational culture.

6. LIMITATIONS

Although this study may have expanded the scientific knowledge about strategic orientation,

market turbulence, competitive intensity, organizational commitment within the baking industry

in Iraq, a few limitations must be mention here. The data was collect from agricultural bank

through self-reporting from the perspective of employees. Future studies could be extend to

other banks in Iraq to obtain more comprehensive understanding of the relationship between

strategic orientation and external environment on organizational commitment. This study tried

to contribute to the knowledge base of existing literature on strategic management and

organizational behaviour in the banking industry in Iraq.

This study focused on one selected bank, which is located in AL–Qadissya governorate in Iraq.

The sample of this study may be limited for generalization to the whole population in the

banking industry. This study finding are suitable and useful to measure the effects of strategic

orientation and external environment in agricultural bank in Iraq.


54

In our point view, in order to expand the sample to cover more banks in Iraq to generalize these

results, future research may include internal and external environment to clarify the overall

image of banks according to the entire environment that surrounds the banks. Another thing that

must be mention here is if it is efficient to utilize the information to employees in all functions

in the organization.

Moreover, the sample size is also relatively small and only focuses on agricultural bank, but not

across Iraq. Therefore, future study needs to be carried out empirically to test further specific

types of industry to attain better understanding.

For future researches, the selected sample based on a non-probability sampling method, which

occurs to not representative the whole population. Moreover, the study does not contain the

opinions of external population on the services of the bank.

Future studies may choose to investigate various types of commitment (affective, normative and

continuance) in the banking industry.

REFERENCES

Allen, N. J., & Meyer, J. P. (1990). The measurement and antecedents of affective,

continuance and normative commitment to the organization. Journal of occupational and

organizational psychology, 63(1), 1-18. https://doi.org/10.1111/j.2044-

8325.1990.tb00506.x

Altinay, L. (2010). Market orientation of small ethnic minority-owned hospitality firms.

International Journal of Hospitality Management, 29(1), 148-156.

https://doi.org/10.1016/j.ijhm.2009.07.004

Amdan, S., Rahman, R. A., Shahid, S. A. M., Bakar, S. A., Khir, M. M., & Demong, N. A. R.

(2016). The role of extrinsic motivation on the relationship between office environment

and organisational commitment. Procedia Economics and Finance, 37, 164-169.

https://doi.org/10.1016/S2212-5671(16)30108-3

Appiah-Adu, K., & Singh, S. (1998). Customer orientation and performance: a study of

SMEs. Management Decision, 36(6), 385-394. https://doi.org/10.1108/002517498

10223592

Atak, M., & Erturgut, R. (2010). An empirical analysis on the relation between learning

organization and organizational commitment. Procedia-Social and Behavioral Sciences,

2(2), 3472-3476. https://doi.org/10.1016/j.sbspro.2010.03.537

Auh, S., & Menguc, B. (2007). Performance implications of the direct and moderating effects

of centralization and formalization on customer orientation. Industrial Marketing

Management, 36(8), 1022-1034. https://doi.org/10.1016/j.indmarman.2006.02.010

Bendle, N., & Vandenbosch, M. (2014). Competitor orientation and the evolution of business

markets. Marketing Science, 33(6), 781-795. https://doi.org/10.1287/mksc.2014.0863

Bhattacharyya, S., & Jha, S. (2014). Development of a model relating internal organizational

variables with customer orientation in the context of the emerging economy of India.

Asia-Pacific Journal of Business Administration, 6(1), 4-17.

https://doi.org/10.1108/APJBA-04-2013-0034

Brockman, B. K., Jones, M. A., & Becherer, R. C. (2012). Customer orientation and

performance in small firms: Examining the moderating influence of risk‐taking, innovativeness, and opportunity focus. Journal of Small Business Management, 50(3),

429-446. https://doi.org/10.1111/j.1540-627X.2012.00361.x

Chad, P. (2013). Extending the use of market orientation: Transforming a charity into a

business. Australasian Marketing Journal (AMJ), 21(1), 10-16. https://doi.org/10.1016/

j.ausmj.2012.08.003


55

Chang, W. J. (2014). Market orientation and business-to-business (B2B): a meta-analysis

perspective. International Journal of Services Technology and Management, 20(1-3),

123-148. https://doi.org/10.1504/IJSTM.2014.063569

Debruyne, M., Frambach, R.T. & Moenaert, R. (2010). Using the weapons, you have: The

role of resources and competitor orientation as enablers and inhibitors of competitive

reaction to new products. Journal of Product Innovation Management, 27(2), 161-178.

https://doi.org/10.1111/j.1540-5885.2010.00708.x

Dev, C., Zhou, K. Z., Brown, J., & Agarwal, S. (2009). Customer orientation or competitor

orientation which marketing strategy has a higher payoff for hotel brands? Cornell

Hospitality Quarterly, 50(1), 19-28. https://doi.org/10.1177/1938965508320575

Dhurup, M., Surujlal, J., & Kabongo, D. M. (2016). Finding synergic relationships in

teamwork, organizational commitment and job satisfaction: a case study of a construction

organization in a developing country. Procedia Economics and Finance, 35, 485-492.

https://doi.org/10.1016/S2212-5671(16)00060-5

Felgueira, T., & Rodrigues, R. (2015). Market orientation of teachers and researchers in

higher education institutions: a new approach. Procedia-Social and Behavioral Sciences,

174(12), 3017–3024. INTE (Proceedings of the International Conference on New

Horizons in Education, 2014, 25-27 June 2014, Paris, France).

https://doi.org/10.1016/j.sbspro.2015.01.1092

Foreman, J., Donthu, N., Henson, S., & Poddar, A. (2014). The performance implications of

planning, implementation, and evolution of firms' customer and competitor orientations.

Journal of Marketing Theory and Practice, 22(4), 349-366.

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2006). Multivariate data analysis

(sixth edition). New Jersey: Upper Saddle River.

Hanaysha, J. (2016a.) Testing the effects of employee engagement, work environment, and

organizational learning on organizational commitment. Procedia-Social and Behavioral

Sciences, 229, 289-297. https://doi.org/10.1016/j.sbspro.2016.07.139

Hanaysha, J. (2016b). Examining the effects of employee empowerment, teamwork, and

employee training on organizational commitment. Procedia-Social and Behavioral


Hennig-Thurau, T. (2004). Customer orientation of service employees: Its impact on customer

satisfaction, commitment, and retention. International Journal of Service Industry

Management, 15(5), 460-478. https://doi.org/10.1108/09564230410564939

Herhausen, D. (2011). Understanding proactive customer orientation: construct development

and managerial implications. Springer Science & Business Media.

Hurley, R. F., & Hult, G. T. M. (1998). Innovation, market orientation, and organizational

learning: an integration and empirical examination. The Journal of Marketing, 42-54.

https://doi.org/10.2307/1251742

Idar, R., Youssef, Y., & Mohammed, R. (2012). The effect of market orientation as mediator

to strategic planning practices and performance relationship: evidence from Malaysian

SMEs. Procedia Economics and Finance, 4, 68–75. https://doi.org/10.1016/S2212-

5671(12)00322-X

Jaworski, B. J., & Kohli, A. K. (1993). Market orientation: antecedents and consequences.

The Journal of Marketing, 53-70. https://doi.org/10.2307/1251854

Jiang, R., & Kortmann, S. (2014). On the importance of mediating dynamic capabilities for

ambidextrous organizations. Procedia CIRP, 20, 85-92. https://doi.org/10.1016/j.procir.

2014.05.036

Jones, E., Buschb, P., & Dacinc, P. (2003). Firm market orientation and salesperson customer

orientation: interpersonal and intrapersonal influences on customer service and retention


56

in business-to-business buyer–seller relationships. Journal of Business Research, 56(4),

323–340. https://doi.org/10.1016/S0148-2963(02)00444-7

Kirca, A. (2011). The effects of market orientation on subsidiary performance: Empirical

evidence from MNCs in Turkey. Journal of World Business, 46(4), 447-454, Middle East

Special Issue Section. https://doi.org/10.1016/j.jwb.2010.10.005

Kohli, A. K., & Jaworski, B. J. (1990). Market orientation: the construct, research

propositions, and managerial implications. The Journal of Marketing, 1-18.

https://doi.org/10.2307/1251866

Lai, C. S., Pai, D. C., Yang, C. F., & Lin, H. J. (2009). The effects of market orientation on

relationship learning and relationship performance in industrial marketing: The dyadic

perspectives. Industrial Marketing Management, 38(2), 166-172. https://doi.org/10.1016/

j.indmarman.2008.12.004

Mariadoss, B. J., Chi, T., Tansuhaj, P., & Pomirleanu, N. (2016). Influences of firm

orientations on sustainable supply chain management. Journal of Business Research,

69(9), 3406-3414. https://doi.org/10.1016/j.jbusres.2016.02.003

Naidoo, V. (2010). Firm survival through a crisis: The influence of market orientation,

marketing innovation and business strategy. Industrial Marketing Management, 39(8),

1311-1320. https://doi.org/10.1016/j.indmarman.2010.02.005

Narver, J. C., & Slater, S. F., 1990. The effect of a market orientation on business

profitability. The Journal of Marketing, 20-35. https://doi.org/10.2307/1251757

Ndubisi, N. O. (2011). Conflict handling, trust and commitment in outsourcing relationship:

A Chinese and Indian study. Industrial Marketing Management, 40(1), 109-117.

https://doi.org/10.1016/j.indmarman.2010.09.015

Newman, A., Prajogo, D., & Atherton, A. (2016). The influence of market orientation on

innovation strategies. Journal of Service Theory and Practice, 26(1), 72-90.

https://doi.org/10.1108/JSTP-02-2015-0044

Özşahin, M., Zehir, C., Acar, A. Z., & Sudak, M. K., 2013. The effects of leadership and

market orientation on organizational commitment. Procedia-Social and Behavioral


Pousa, C., & Mathieu, A., 2014. Boosting customer orientation through coaching: a Canadian

study. International Journal of Bank Marketing. 32(1), 60-80. https://doi.org/10.1108/

IJBM-04-2013-0031

Powpaka, P. (2006). How market orientation affects female service employees in Thailand.

Journal of Business Research, 59(1), 54-61. https://doi.org/10.1016/j.jbusres.2005.03.004

Rapp, A., Beitelspacher, L. S., Schillewaert, N., & Baker, T. L. (2012). The differing effects

of technology on inside vs. outside sales forces to facilitate enhanced customer

orientation and interfunctional coordination. Journal of Business Research, 65(7), 929-

936. https://doi.org/10.1016/j.jbusres.2011.05.005

Rapp, A., Trainor, K.J., & Agnihotri, R. (2010). Performance implications of customer-

linking capabilities: Examining the complementary role of customer orientation and

CRM technology. Journal of Business Research, 63(11), 1229-1236.

https://doi.org/10.1016/j.jbusres.2009.11.002

Saboo, A., & Grewal, R. (2013). Stock market reactions to customer and competitor

orientations: the case of initial public offerings. Journal Marketing Science, 32(1), 70-88.

https://doi.org/10.1287/mksc.1120.0749

Salahudin, S. N., binti Baharuddin, S. S., Abdullah, M. S., & Osman, A. (2016). The effect of

Islamic work ethics on organizational commitment. Procedia Economics and Finance,

35, 582-590. https://doi.org/10.1016/S2212-5671(16)00071-X


57

Šályová, S., Táborecká-Petrovičová, J., Nedelová, G., & Ďaďo, J. (2015). Effect of marketing

orientation on business performance: a study from Slovak foodstuff industry. Procedia

Economics and Finance, 34, 622-629. https://doi.org/10.1016/S2212-5671(15)01677-9

Singh, R., & Koshy, A. (2011). Does salesperson's customer orientation create value in B2B

relationships? Empirical evidence from India. Industrial Marketing Management, 40(1),


Slater, S. F., & Narver, J. C. (1994). Market orientation, customer value, and superior

performance. Business Horizons, 37(2), 22-28. https://doi.org/10.1016/0007-6813

(94)90029-9

Suliyanto, S., & Rahab, R., 2012. The role of market orientation and learning orientation in

improving innovativeness and performance of small and medium enterprises. Asian

Social Science, 8(1), 134. http://dx.doi.org/10.5539/ass.v8n1p134

Thakor, M. V., & Joshi, A. W. (2005). Motivating salesperson customer orientation: insights

from the job characteristics model. Journal of Business Research, 58(5), 584-592.

https://doi.org/10.1016/j.jbusres.2003.10.002

Theoharakis, V., & Hooley, G., 2008. Customer orientation and innovativeness: Differing

roles in New and Old Europe. International Journal of Research in Marketing, 25(1),

69-79. https://doi.org/10.1016/j.ijresmar.2007.09.007

Wei, Z., Zhao, J., & Zhang, C., (2014). Organizational ambidexterity, market orientation, and

firm performance. Journal of Engineering and Technology Management, 33, 134-153.

https://doi.org/10.1016/j.jengtecman.2014.06.001

Zhang, D. (2008). Integration of market and entrepreneurial orientation (doctoral

dissertation, University of Manitoba).

Zhang, J. A., Edgar, F., Geare, A., & O'Kane, C. (2016). The interactive effects of

entrepreneurial orientation and capability-based HRM on firm performance: The

mediating role of innovation ambidexterity. Industrial Marketing Management, 59,


Zhou, K., and Li, C. (2007). How does strategic orientation matter in Chinese firms? Asia

Pacific Journal Management, 24, 447-466. https://doi.org/10.1007/s10490-007-9048-1

strategic orientation and external environment on ...mer.ase.ro/files/2018_1/3-4.pdf · create...

Documents